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Important Regulatory Disclosures

iSTOX

March 23, 2020 06:57

Updated

Requirements To Register As An iSTOX Investor

ICHX Tech Pte. Ltd. (“ICHX”) is the operator of the iSTOX platform. The platform is only open to users that are accredited or institutional investors, as defined below. Only accredited or institutional investors have access to trade on ICHX’s organised market. Where users provide or intend to provide any other person in Singapore with access to trade indirectly on the iSTOX platform, the user shall only provide a person with such access to the iSTOX platform if that person is an accredited investor or institutional investor, as defined below.

(b) whose financial assets (net of any related liabilities) exceed in value S$1 million (or its equivalent in a foreign currency) where “financial asset” means —

(i) a deposit as defined in section 4B of the Banking Act (Cap. 19);

(ii) an investment product as defined in section 2(1) of the Financial Advisers Act (Cap. 110); or

(iii) any other asset as may be prescribed by regulations made under section 341 of the Securities and Futures Act (Cap. 289) (“SFA”); or

(c) whose income in the preceding 12 months is not less than S$300,000 (or its equivalent in a foreign currency).

A corporation with net assets exceeding S$10 million in value (or its equivalent in a foreign currency) as determined by the most recent audited balance-sheet or certified balance-sheet within the preceding 12 months.

Any trustee of a trust all the beneficiaries of which are accredited investors.

Any trustee of a trust all the settlors of which:

(i) are accredited investors;

(ii) have reserved to themselves all powers of investment and asset management functions under the trust; and

(iii) have reserved to themselves the power to revoke the trust.

Any trustee of a trust the subject matter of which exceeds S$10 million (or its equivalent in a foreign currency) in value.

An entity (other than a corporation) with net assets exceeding S$10 million (or its equivalent in a foreign currency) in value.

A partnership (other than a limited liability partnership) in which every partner is an accredited investor.

A corporation the entire share capital of which is owned by one or more persons, all of whom are accredited investors.

a person who holds a joint account with an accredited investor, in respect of dealings through that joint account.

Institutional investors are:

1. a bank that is licensed under the Banking Act (Chapter 19) of Singapore;

2. a merchant bank that is approved as financial institution under Section 28 of the Monetary Authority of Singapore (Chapter 186) of Singapore;

3. a finance company that is licensed under the Finance Companies Act (Chapter 108) of Singapore;

4. a company or society registered under the Insurance Act (Chapter 142) as an insurer;

5. the Singapore Government or a central government in a country other than Singapore;

6. a statutory body established under Act in Singapore;

7. the Government of Singapore Investment Corporation Pte Ltd;

8. an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country other than Singapore whose principal activity is;

(i) to manage its own funds;

(ii) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or

(iii) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; or

9. any entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country other than Singapore and whose funds are managed by an entity in sub-paragraph (h) above;

13. a person who is exempted from the requirement to hold a capital market services licence to carry on business in fund management under paragraph 5(1)(i) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations (Rg 10), and who has assets under its management of not less than S$15 million;

14. a headquarters company or Finance and Treasury Centre which carries on a class of business involving fund management but only to the extent that the business in fund management has been approved as qualifying service in relation to that headquarters company of Finance and Treasury Centre under Section 43E(2)(a) or Section 43G(2)(a) of the Income Tax Act (Chapter 134) of Singapore;

15. an entity or a trust formed or incorporated in a jurisdiction other than Singapore, which is regulated for the carrying on of any financial activity in that jurisdiction by a public authority of that jurisdiction that exercises a function that corresponds to a regulatory function of the Monetary Authority of Singapore under the SFA, the Banking Act (Chapter 19) of Singapore, the Finance Companies Act (Chapter 108) of Singapore, the Monetary Authority of Singapore Act (Chapter 186) of Singapore and the Insurance Act (Chapter 142) of Singapore.

Implications Of Investing As An Accredited Investor On iSTOX

Only accredited or institutional investors may use our platform. The rationale is that such investors are better able in terms of financial and other resources to seek their own professional advice and conduct the necessary due diligence prior to making any investment decision. You should seek independent professional advice if you do not fully understand the risks of investing through our platform. Investors will also not have access to the dispute resolution scheme operated by the Financial Industry Disputes Resolution Centre Ltd.

There are less investor protection requirements. If you are an accredited investor, ICHX would be exempt from complying with certain requirements under the Securities and Futures Act (Chapter 289) (“SFA”) and certain regulations and notices issued thereunder.

Prospectus Exemptions under Sections 275 and 305 of the SFA. Under Part XIII of the SFA, all offers of securities and securities-based derivatives contracts, and units of collective investment schemes are required to be made in or accompanied by a prospectus in respect of the offer that is lodged and registered with the MAS and which complies with the prescribed content requirements, unless exempted. The SFA further provides for criminal liability for false and misleading statements contained in the prospectus, omissions to state any information required to be included in the prospectus or omissions to state new circumstances that have risen since the prospectus was lodged with the MAS which would have been required to be included in the prospectus if it had arisen before the prospectus was lodged with the MAS. In addition, certain persons, including the person making the offer, the issuer, the issue manager and the underwriter (the “Persons”) may be liable to compensate any person who suffers loss or damage as a result of the false or misleading statement in or omission from the prospectus, even if such persons were not involved in the making of the false or misleading statement or the omission.

Sections 275 and 305 of the SFA are exemptions from the prospectus registration requirement under the SFA, and exempt the offeror from registering a prospectus when the offer of securities and securities-based derivatives contracts, and units of collective investment schemes is made to relevant persons. Relevant persons include Accredited Investors. In addition, secondary sales made to institutional investors and relevant persons, which include Accredited Investors, remain exempt from the prospectus registration requirement provided that certain requirements are met.

Subsequent Sales: Subsequent sales of securities, securities-based derivatives contracts and collective investment schemes are subject to restrictions under Section 276(1) and 276(2) or, as the case may be, Sections 305A(1)(b) such that subsequent sales to relevant persons (including Accredited Investors) will continue to be exempt from prospectus requirements.

Where securities, securities-based derivatives contracts and collective investment schemes are subscribed or purchased under Section 275 or 305 of the SFA by a relevant person which is:

a corporation (which is not an Accredited Investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an Accredited Investor (the “Corporation”); or

a trust (where the trustee is not an Accredited Investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an Accredited Investor (the “Trust”),

inter alia, securities of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that Corporation or that Trust has acquired the securities, securities-based derivatives contracts and collective investment schemes pursuant to an offer made under Section 275 or 305 of the SFA except, inter alia, to an institutional investor or to a relevant person.

If you opt to be treated as an Accredited Investor, the above restrictions will not apply and you will not be prohibited from being a transferee of the securities of the Corporation or interests in the Trust in the circumstances specified.

When we deal with you as an Accredited Investor, the issuer and/or offeror is exempt from the prospectus requirements under Part XIII of the SFA pursuant to the exemptions under Sections 275 and 305 of the SFA. As a result of this, the issuer and/or offeror is not under any statutory obligation to ensure that all offers of the relevant products to you are made in or accompanied by a prospectus that is lodged and registered with the MAS and which complies with the prescribed content requirements. Consequently, the issuer and/or offeror is not subject to the statutory prospectus liability under the SFA and you would not be able to seek compensation from the Persons under the civil liability regime for prospectuses even if you suffer loss or damage as a result of any false or misleading statement in or omissions in the offering document. Subsequent sales of securities, securities-based derivative contracts and collective investment schemes first sold under inter alia Section 275 and 305 can also be made to you, as well as transfers of securities of Corporations and interests in Trusts. You are therefore not protected by the prospectus registration requirements of the SFA.

Restrictions on Advertisements under Sections 251 and 300 of the SFA. Sections 251 and 300 of the SFA prohibit any advertisement or publication referring to an offer or intended offer of securities and securities-based derivatives contracts, and units of collective investment schemes from being made, except in certain circumstances. In this regard, where a preliminary document has been lodged with the MAS, certain communications may be made. These include the dissemination of, and presentation of oral or written material on matters contained in, the preliminary document which has been lodged with the MAS to institutional investors and relevant persons under Sections 251(3), 251(4)(a), 300(2A) and 300(2B)(a) of the SFA. Relevant persons include Accredited Investors.

When we deal with you as an Accredited Investor, you may receive communications relating to a preliminary document which has been lodged with the MAS. You are therefore not protected by the requirements of Sections 251 and 300 of the SFA.

Part III of the Securities and Futures (Licensing and Conduct of Business) Regulations (“SFR”).

Part III of the SFR stipulates the requirements imposed on us in relation to the treatment of customers’ assets. While we remain under the statutory obligation to deposit all assets received on your account in a custody account maintained in accordance with Regulation 27 of the SFR or any other account into which you direct the assets be deposited, as an Accredited Investor, the enhanced safeguards in relation to the assets that we receive on your account will not apply.

We are also exempt from the following statutory obligations: (i) the disclosure requirements pertaining to the manner in which your assets are held (whether locally or in a foreign jurisdiction), as specified under Regulation 27A of the SFR; (ii) the prohibition against transferring title in your assets to us or any other person except in certain prescribed circumstances relating to the borrowing or lending of your specified products and using your assets to meet our own obligations under Regulation 34A and 35 of the SFR; (iii) the obligation to inform you that we may use your assets for a sum not exceeding the amount owed by you to us, disclose the risks of such use to you and obtain your consent before using your assets, including mortgaging, charging, pledging or hypothecating your assets.

We have summarised the requirements below.

Retail customer

Accredited Investor

Disclosure requirement

To make certain disclosures (such as whether the assets will be commingled with other customers and the risks of commingling, consequences if the institution which maintains the custody account becomes insolvent) in writing prior to depositing assets in custody account

No such requirement

Prohibition on transferring title of assets received from customer to the CMSL or any other person

Prohibited unless transferred in connection with borrowing or lending of specified products in accordance with Regulation 45 of the SFR.

No such requirement

Withdrawals from custody account to transfer the asset to any other person or account in accordance with the written direction of the customer

Not permitted to transfer retail customer’s assets, to meet any obligation of the CMSL in relation to any transaction entered into by the CMSL for the benefit of the CMSL.

No such prohibition

Customer Assets

Deposit into a custody account maintained in accordance with Regulation 27 of the SFR (requires the custody account to be maintained with certain specified institutions only); or

Deposit into account directed by retail customer to which retail customer has legal and beneficial title and maintained with, inter alia, licensed banks, merchant banks or finance companies or banks established and regulated as banks outside Singapore

Deposit into a custody account maintained in accordance with Regulation 27 of the SFR (requires the custody account to be maintained with certain specified institutions only); or

Deposit into account directed by Accredited Investor

Mortgage of customer’s assets – The CMSL may mortgage, charge, pledge or hypothecate customer’s assets for a sum not exceeding the amount owed by the customer to the CMSL

Prior to doing so, the CMSL must inform the retail customer of this right, explain the risks and obtain written consent of the retail customer

No equivalent requirement

When we deal with you as an Accredited Investor, we are exempt from treating you as a “retail investor” in relation to certain requirements stipulated under Part III of the SFR pertaining to the treatment of a retail customer’s assets. You are therefore not protected by those requirements under Part III of the SFR.

Regulation 40 of the SFR. Regulation 40(1) of the SFR provides that a CMSL is required to furnish to each customer on a monthly basis a statement of account containing certain particulars prescribed under Regulation 40(2) of the SFR. In addition, Regulation 40(3) of the SFR provides that a CMSL is required to furnish to each customer, at the end of every quarter of a calendar year, a statement of account containing, where applicable, the assets, derivatives contracts of the customer and spot foreign exchange contracts for the purposes of leveraged foreign exchange trading of the customer that are outstanding and have not been liquidated and cash balances (if any) of the customer at the end of that quarter.

When we deal with you as an Accredited Investor and provided we have made available to you (on a real-time basis) the prescribed particulars in the form of electronic records stored on an electronic facility and you have consented to those particulars being made available in this manner or you have requested in writing not to receive the statement of account, we are not under any statutory obligation to furnish a monthly or quarterly statement of account to you. You are therefore not protected by the requirements of Regulations 40(1) and (3) of the SFR.

Regulation 45 of the SFR. Regulation 45 of the SFR provides that borrowing and lending of specified products by a CMSL (i) must be recorded in a prior written agreement between the CMSL and the lender or borrower or their duly authorised agent where such agreement includes certain prescribed details; and (ii) must be collateralised. In particular, the CMSL is required to ensure that the collateral provided must, throughout the period that the specified products are borrowed or lent, have a value of not less than 100% of the market value of the specified products borrowed or lent. Regulation 45 of the SFR further sets out the acceptable forms of collateral for these purposes.

When we deal with you as an Accredited Investor, we are not under any statutory obligation to provide collateral to you under Regulation 45 of the SFR when we borrow specified products from you. You are therefore not protected by the collateral requirements under Regulation 45 of the SFR when you lend specified products to us. Where we provide assets to you as collateral for the borrowing, the written agreement for shall specify whether the specified products borrowed and the assets provided comprising specified products (if any) are marked to market and if so, the procedures for calculating the margin. However (unlike for retail investors), the agreement does not have to include the requirement to mark-to-market on every business day the specified products that are borrowed or lent nor the minimum Collateral comprising specified products and the procedures for calculating the margins.

Regulation 47DA of the SFR. Regulation 47DA(1) and (2) of the SFR provide for certain general risk disclosure requirements that a CMSL dealing in specified capital markets products must comply with. For this purpose, “specified capital markets products” means capital markets products other than futures contracts, spot foreign exchange contracts for the purposes of leveraged foreign exchange trading and foreign exchange over-the-counter derivatives contracts. In particular, the CMSL must not open a trading account for a customer for the purpose of entering into transactions of sale and purchase of any specified capital markets products unless it has furnished the customer with a written risk disclosure document disclosing the material risks of the specified capital markets products, and receives an acknowledgement signed and dated by the customer that he has received and understood the nature and contents of the risk disclosure document. Further, the CMSL must not enter any transaction of sale or purchase of any specified capital markets products unless it has informed the customer whether it is acting in that transaction as a principal or agent and/or its intention to do so.

When we deal with you as an Accredited Investor, we are not under any statutory obligation to provide you with the risk disclosures, and the capacity in which we act, in the manner contemplated under Regulation 47DA of the SFR. You are therefore not protected by the requirements under Regulation 47DA of the SFR.